The court established that the definition of agricultural produce in the Bihar Agricultural Produce Markets Act, which included processed or non-processed products, did not extend to manufactured products. The court emphasized the distinction between processing, which involved minimal changes to the substance of the product, and manufacturing, which resulted in a new substance with a different identity.

HARI LAL AGRAWAL, J.

1. Whether Zarda manufactured by the petitioner firm will be covered within the ambit of tobacco, a notified agricultural produce within the meaning of S.2(1)(a) of the Bihar Agricultural Produce Markets Act, is the short but ticklish question which falls for decision in this case.

2. The petitioner firm manufactures Zafrani Zarda in the town of Muzaffarpur, which is an excisable commodity under the Central Excises and Salt Act. The fact that Zarda is prepared out of tobacco is not in dispute. The petitioners have stated the process of manufacturing Zafrani Zarda and the same is as follows.

At first plain water is sprinkled on the bundles of tobacco. It is allowed to ferment for some days so as to be able to generate heat. The stalks of tobacco are then broken and cleaned, and thereafter treated with permissible colours and compounds, and cut into thin strips by shearing machine. This product is known as Sada Zarda. Sada Zarda is then allowed to dry for some days for preparing zafrani zarda by coating it with Zafrani solution. Flavouring essence solution is sprinkled on it; besides various other commodities such as powdered Ilaichi, Long, Dalchini, Menthol, Keshar, silver foils etc. are mixed up and then the same are packed in special wrappers and put into small containers of various weights and sizes for marketing.

3. The petitioner firm imports Sada Zarda from various places such as Varanasi, Delhi etc., and the same is made Zafrani Zarda by processing it as indicated above. It may be stated that Zafrani Zarda prepared by the petitioner firm has got a good market and repute. The price of the end product of the petitioner firm is thus raised by 20 to 25 times of the cost price of Sada Zarda.

4. The petitioner firm was served with a notice dated 29-7-1978 (Annexure 2) from respondent No. 2, the local Agricultural Produce Market Committee, to pay market fee on the sale of Zarda by the petitioner firm, on the ground that it was included in tobacco, a scheduled item under the Act. The petitioner firm refuted the liability to pay market fee mainly on the ground that Zarda, which was entirely a different commodity, was not covered under the net of tobacco, but since the Market Committee insisted for payment and issued threatening notices the petitioners filed the writ application.

5. The case was earlier heard in January, 1984 and judgment was reserved. Later on, however, we decided to refer the case to a larger Bench and accordingly by our order dated 8-2-1984 the records were ordered to be placed before the Hon ble the Chief Justice who, in absence of any conflict in the views of this Court in some of the cases which were since decided, declined to accept the reference and the case was sent back to us for disposal. Accordingly the matter was placed for hearing on 18-3-1985 and although the hearing of the case had been completed earlier, on account of lapse of time learned counsel for both the parties were allowed opportunities to give a resume of the arguments.

6. It may be mentioned that an application was filed by the Bihar Agricultural Produce Marketing Board, the apex body under the Act, to enforce and regulate the provisions thereof, for its intervention. That application was allowed on 30-1-1984 and Mr. Ram Janam Ohja, appearing for the Marketing Board was also heard on both the occasions.

7. The stand of the respondents, on the other hand, is that Zarda being basically a product of tobacco and processed from tobacco, is an agricultural produce and the market fee has been rightly demanded on the trade of Zarda.

8. The parties also joined issues regarding the validity of the constitution of the Market Committee and the right to impose market fee etc., in the petition and the counter-affidavit, but since all these questions have been authoritatively settled by this Court as well as by the highest Court in a series of decisions, no argument was addressed on behalf of any of the parties on this ques